A year since the start of lockdown restrictions, the government has published a four-stage roadmap to ease restrictions across England and provide a route back to some level of normality. With a full vaccination programme in place, a plan to reopen retail on the 12 April and end all restrictions by the 21 June, we’re beginning to see light at the end of the tunnel for retailers and consumers alike.
Weaving in and out of lockdowns and restrictions has enabled most retailers to invest in digitisation and e-commerce to remain competitive and in some cases, stay in business. The online retail sector was already growing at considerable rate pre-covid. In 2019, e-commerce sales accounted for 14.1% of all retail sales worldwide and this figure is expected to reach 22% in 2023.
The lockdown and closure of physical stores has allowed retailers to digitise, pivot and focus on different verticals, meaning that the online space is now more competitive than ever. What does the rest of 2021 and the post-covid landscape look like for retailers?
2020 changed the online landscape forever
The ways of working and living have changed beyond recognition. The year 2020 saw a 74% surge in online shopping and 45% of adults in the UK received more parcels during the lockdown than ever before.
In 2020, retail as an industry was be the biggest digital ad spender in the UK, accounting for one in five digital ad pounds with a 20% share of all UK ad spending.
As consumers, we’ve become much more demanding during the pandemic; from the moment we arrive on a website, to the logistics of delivery. As online retail continues to grow at a rapid pace, it’s estimated that 95% of all purchases will be through e-commerce by 2040.
The stay-at-home plea has also amplified social media usage. According to a Digital Commerce 360 survey, 72% agreed that their social media consumption has increased during the pandemic. As well as how much, it’s also impacted how we use social media, as over half (66%) of respondents agreed or strongly agreed that social media plays a crucial role in impacting their decision to consider a brand.
As a result, social media advertising grew by 9.3% to $98.3bn in 2020 and is projected to rise 12.2% in 2021, pushing the market to a value of $110.3bn, almost a fifth (18.6%) of all advertising spend.
As alternative social media channels such as TikTok continue to dominate with over 2.6bn downloads, online video is up 7.9% to $52.7bn and is anticipated to be the fastest-growing format in 2021, with spend up by 12.8%.
Understandably, outdoor advertising such as OOH and cinema ads were down in 2020 as we all worked and remained at home. Out of home advertising is down 27.3% ($11.3bn). However, OOH is forecast to be the second-fastest growing medium in 2021, with adspend rising by a fifth (20.2%) as we slowly ease out of restrictions.
While we are on the brink of normal life, there is no sign of the sector slowing down. Data from the ONS has found UK online sales in January 2021 accounted for 35.2% of all retail, a record that beats even last May’s high of 34.1%, when the coronavirus crisis was at its first peak. Similarly, research from IMRG found that online retail performance is up around 80% YOY in January and February.
As we look ahead to 2021, online retail continues to flourish as physical retail changes dramatically, seeing established stores such as Debenhams and brands in the Arcadia Group disappear from the high street forever. We have been able to assess the performance of retailers using The BOSCO™ index, which is a measure of how well you are exploiting your digital opportunities compared to your competitors. The index is computed 0 - 1000, with 500 being the median score.
Leading online retailer Asos (BOSCO™ Index*: 699) acquired the brands; Topshop (629), Topman (579) and HIIT Sportswear (623) in a £265m deal. Similarly, another fast-growing retailer, Boohoo (652) purchased long-standing department store Debenhams (649) and have since announced the acquisition of the remaining Arcadia brands including Wallis (594) and Dorothy Perkins (617) for £25m.
Their integration is part of Asos’ long-term plans to revitalise the high-street brands and have since launched a multi-million pound, largely social-driven campaign to target Topshop customers.
Digital marketing now requires a competitive advantage given the crowded marketplace
Significant changes to the retail and e-commerce sector over the past 12 months, means that a lot more brands are active in the same space, which is ultimately pushing advertising costs up.
According to the first dentsu ‘Ad Spend Report’ since the pandemic began, global advertising investment is forecast to grow by 5.8% in 2021 and $579bn will be spent globally.
Digital advertising for pureplay media channels such as Amazon, Facebook and Google are expected to account for 61% of advertising in 2021. This share has doubled since 2015 and by 2024, research analysts estimate that digital advertising will have a 66% share globally.
Take big online events such as Black Friday for example, research suggests that 50% of customers who came through Black Friday specific keywords were new customers searching for a deal, resulting in budgets not going as far.
Another key issue many digital marketers will face in 2021, particularly within the paid space is Apple’s iOS 14 update, which aims to increase user privacy. The expectation is that there will be a growing number of users who opt-out of tracking on iOS devices, which will negatively impact data collection and ad personalisation.
Standing out in a saturated, ad-heavy market
Despite its expediential growth over the last year, TikTok is still a relatively small advertising platform compared to the likes of Google and Facebook. Although TikTok has several high-impact placements such as brand takeovers and hashtag challenges that come with a hefty price tag, in-feed ads are much more accessible. Cost-per-thousand-impressions (CPM) can be as low as $1 and CPCs are around $0.19.
Depending on your audience, it could be much more advantageous and cost effective to run ads on smaller social platforms, particularly those that are mobile facing, which accounts for over half of internet traffic.
Research has found that story telling can be 22% more memorable than just statistics. By interacting and connecting with your customers and understanding the problems they face, you’ll cultivate an authentic perspective, which should then inform your digital marketing.
As the corporate barrier has broken down over the last 12 months due to many businesses working from home, we’ve seen many brands break the mould and think outside-the-box.
Weetabix suggested that topping your wheat biscuits with Heinz (BOSCO™ Index*: 718) baked beans was a viable breakfast option, which sparked a viral discussion.
Other brands and businesses such as KFC (BOSCO™ Index*: 665), Tinder (528), Lidl (736) and even the NHS replied with puns and jokes that kept consumers and other brands alike engaged.
As well as seeing over 250,000 interactions on Twitter alone, since the viral post, Weetabix has reported a surge in sales, with Sainsbury’s seeing a 15% uplift.
Regardless of the marketing channel, your efforts will be more impactful when you start focusing more on the value you offer. Fashion brand White Stuff (BOSCO™ Index: 567*) explained how they stayed in contact with their customers throughout 2020 despite their stores being closed for long periods. This was a case of using their feedback to make changes to the online experience and maintaining a line of communication.
A key trend that continued to grow from Black Friday and beyond, is the use of c-commerce (conversational commerce). Peak conversation volumes during the Black Friday to Cyber Monday period grow 200% YOY. By establishing a comprehensive c-commerce strategy, this gave consumers not only what they wanted to hear but what they expected from that specific brand.
The overwhelming majority of consumers of all ages report a strong desire to message with brands. For the first time, older consumers are showing the same level of interest in messaging with brands as younger demographics.
The last 12 months have proven difficult for some retailers but has enabled others to explore the possibilities of digital and even reap the benefits. Although, breathing space is much tighter due to the number of retailers now active in the online space, the pandemic has somewhat evened the playing field for smaller businesses against the big players. Even in today’s saturated media landscape, it’s possible to cut through the noise.
With the market value of social media expected to reach $110.3bn, there is opportunity not yet explored. Many retailers may look towards lowering customer acquisition costs, experimenting with ads, viral content, mobile-facing campaigns and leveraging smaller social platforms.
With challenging times ahead, you need certainty when it comes to advertising in the right channels. BOSCO™ provides retailers with predictive marketing analytics, combining trusted data and machine learning for maximum budget efficiency.